Surviving the Chinese New Year

Chinese New Year is just around the corner (January 31st) and companies worldwide are already starting to feel it.  The Chinese New Year, or Spring Festival as it’s called, is a time for workers to migrate home and spend quality time with their families.  During this time China shuts down for two to four weeks.   Many workers decide to stay home or find employment with different factories upon the end of the New Year.   Factories start back up slowly while they recruit new employees and replenish materials.  A proactive approach to handling the Chinese New Year can get your company through it stress free.

chinaWho does the Chinese New Year affect?

Any company with a product or portion of that product being made in China will be affected by the Chinese New Year and should plan accordingly.  For example, materials will be impacted by the New Year, which will impact the manufacturer of the product, which ultimately results in the product being delivered late or not delivered at all.  Many companies will forecast their Chinese New Year demand ahead of time, however others learn the hard way and get stuck waiting for the factories to turn on again.  While tying up cash on safety stock may not sound ideal, mismanaging the New Year and running out of stock could result in thousands or millions of dollars in lost sales.

Navigating Through the Chinese New Year

Being in the business for 25 years has taught us a thing or two about managing the supply chain and getting through the Chinese New Year.  We don’t always have the luxury of knowing who will be placing orders at what time, so we have to plan ahead and be ready.  There are some simple ways to get your company through the Chinese New Year.  Diversify your supply chain.  Having a diverse supply chain allows you to procure materials and/or receive product from one factory when another is down.  If you are single sourced, then building up safety stock is another option.  Place your orders at least a month in advance and order anywhere from one to three months of goods to fulfill upcoming orders.   Many factories deplete materials going into the New Year and must replenish them once they open again.  Remembering the Chinese New Year and preparing for it can go a long way in helping out your business.

Plan, Plan, Plan

Although many companies experience inventory issues during this time, proper planning can help mitigate these problems.  Make the best of the Chinese New Year by keeping a diverse supply chain, holding safety stock, and placing orders far in advance.

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